Thursday, October 11, 2012

China and Japan dispute leads to shrinking auto sales – HMC, TM, GM, Ford Motor Company

The auto sales in China have been shrinking at a very rapid rate right now. A dispute with Japan over issues of territory has also lead to people avoiding the Japanese brands. This, in turn has lead to the lack of demand, which is sure to get the companies disinterested, thereby affecting the economy of China as well.

On Wednesday, the China Association of Automobile Manufacturers said that the sales of passenger vehicles have slowed down, and have faced a 0.3 percent decline as compared to last year. The sales have now come down to 1.32 million units, which does not look very positive. While the decline could be attributed to the territorial dispute with Japan, it would be a matter of wanting to blame someone, if one was to say that that is the sole reason. The economic sluggishness which China has been experiencing for quite a while now, ever since the global crisis in 2008 is also a major reason for this slowdown. The local laws, which are quite stringent in China, have also lead to the slow down. Some local laws try to prevent congestion by preventing the registration of the vehicles.

China is one of the biggest markets in the world, for automobiles. And the sales have declined sharply. In June, what was 15.5 percent came down to 3.7 percent in August, after an 11 percent decline in July. In September, though, the sales have dropped down quite drastically. Passenger cars have not been sold at its usual rate, and China Association of Automobile Manufacturers said that this is affected by the China-Japan dispute as well.

The dispute started group of Islands in the East China Sea, which are uninhabited. The dispute was mainly between Beijing and Tokyo, over the ownership of these islands. This lead to people avoiding the act of buying cars from the Japanese showrooms. This decrease affects China very badly as well, since most of these cars were locally made, and the components were also locally acquired. Honda Motor Co Ltd (ADR)(NYSE:HMC) has suffered a 40.5 percent decline in sales in China. Toyota Motor Corporation (ADR)(NYSE:TM) has seen a 48.9 percent decline, while Nissan Motor Co., Ltd. (ADR)(PINK:NSANY) saw a 35.3 percent decline. 

On the other hand, shares of Ford Motor Company(NYSE:F) ended lower 1.20% to $9.98 and General Motors Company(NYSE:GM) slid 0.57%.

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